Congress' purpose in adopting the CICA was to promote competition in military procurement where possible.
Furthermore, contrary to Alliant's assertion, no exception to this requirement precludes injunctive relief. It has been stated authoritatively that statutory exceptions are to be "narrowly construed," to those "plainly and unmistakably within its terms and spirit." A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493, 89 L. Ed. 1095 , 65 S. Ct. 807 (1945). Alliant relies on § 2304(c)(3)(A) of the CICA which provides that:
(c) The head of an agency may use procedures other than competitive procedures only when --
(3) it is necessary to award the contract to a particular source or sources in order (A) to maintain a facility, producer, manufacturer, or other supplier available for furnishing property or services in case of a national emergency or to achieve industrial mobilization . . .
(emphasis added). Defendants argue that this section authorizes the Army to procure 120mm ammunition through non-competitive means in this case. They further assert that because the Army legally may choose to procure from a sole contractor and thereby establish a monopoly, "it would turn CICA on its head for the Army to be penalized because it chose a single supplier by this transaction." Alliant Mem. at 11.
Defendants' argument fails on two grounds. First, by its terms, the statute allows the Army to procure services through "procedures other than competitive procedures" only when this is "necessary" to "maintain" a particular facility or supplier "in case of a national emergency or to achieve industrial mobilization." Defendants have made no showing that the anticompetitive merger is "necessary" for the Army for the specific purposes of the statutory exception. Considering the pro-competitive thrust of the Competition in Contracting Act, exceptions to it must be strictly construed. In fact, the Army clearly has a competitive alternative in this case -- a winner-take-all competitive bid -- which the Army itself planned before the merger plan appeared and which it since has indicated will be pursued if the merger does not occur. Pl. Ex. 31 at 4-5, 9, 15. The present circumstances therefore do not fall within the scope of the exception on its face.
In addition, even where the Act allows the Army to let a contract without competition, it does not follow that the statute similarly authorizes private parties to combine to avoid an otherwise competitive bid. Here, the Army had intended to proceed with a competitive bid to reduce its suppliers to a single source. Nothing in the statute authorizes private companies unilaterally to eliminate the Army's competitive option and to offer the Army the fait accompli of a single choice. And nothing in the record supports the contention that it is the Army, rather than defendants, that has chosen this transaction.
Thus, because the merger will probably raise the price of the contract for the training rounds, will establish a 100 percent monopoly over the production of all four rounds, and will entirely eliminate competition in the bid for the training rounds contract, plaintiffs have demonstrated a "strong likelihood" that they will prevail in their Clayton Act claim. PPG Industries, 798 F.2d at 1507.
B. Benefit to the Public Interest
The second consideration to be weighed in granting or denying a preliminary injunction is the injunction's impact on the public interest. "The heart of our national economic policy long has been faith in the value of competition." Standard Oil Co. v. FTC, 340 U.S. 231, 248, 95 L. Ed. 239 , 71 S. Ct. 240 (1951). Through the Clayton and Sherman Acts, Congress has designated the promotion of competition as serving the public interest. A demonstration of probable anticompetitive effects, therefore, generally alone is adequate to satisfy the equity requirement for injunctive relief. As this Circuit consistently has held, there is a "presumption in favor of a preliminary injunction when the Commission establishes a strong likelihood of success on the merits." PPG Industries, 798 F.2d at 1507; see also Weyerhaeuser, 214 U.S. App. D.C. 254, 665 F.2d 1072, 1085 (D.C. Cir. 1981).
Defendants, however, raise two public interest claims in an effort to rebut this presumption. First, defendants point to the alleged inefficiencies associated with the competitive bid, to argue that the balance of the equities weighs against the presumptive preference for competition in this case.
Allegations that competition is not in the best interest of the Nation or an industry are not new to the courts. Banks, engineering societies, and other industries of social and economic consequence have argued that economies of scale and other efficiencies entitle them to an exception to the antitrust rules. See, e.g., Nat. Society of Professional Engineers v. United States, 435 U.S. 679, 55 L. Ed. 2d 637 , 98 S. Ct. 1355 (1978); Philadelphia Nat. Bank, 374 U.S. 321, 10 L. Ed. 2d 915 , 83 S. Ct. 1715 .
There are circumstances indeed where greater market concentration is tolerated when the net result is to increase or facilitate competition. Brown Shoe, 370 U.S. at 319. Here, however, the possibility that the Army might achieve greater efficiencies of scale as a result of the merger is insufficient to override the public's clear and fundamental interest in promoting competition. As the Supreme Court has noted, Congress already has weighed these interests and placed its blessing on the side of competition.
A merger the effect of which "may be substantially to lessen competition" is not saved because, on some ultimate reckoning of social or economic debits and credits, it may be deemed beneficial. A value choice of such magnitude is beyond the ordinary limits of judicial competence, and in any event has been made for us already, by Congress. . .
Philadelphia Nat. Bank, 374 U.S. at 371. Thus, "even assuming occasional exceptions to the presumed consequences of competition, the statutory policy precludes inquiry into the question whether competition is good or bad." Professional Engineers, 435 U.S. at 695.
Defendants raise a second, and more credible, claim that, in this case, the public interest in promoting competition by enjoining the merger is outweighed by serious national security considerations. Specifically, they suggest that a competitive bid would create a risk that "the Army will not have the advanced tactical ammunition they need" in the event of a national emergency. Def. Findings at P 80. The clear, indeed explicit, suggestion, is that enjoining the merger might impair military operations.
These are serious concerns, which, as defendants assert, are entitled to "great weight." Unquestionably, circumstances could arise under which national defense priorities would override any other public interest in preserving competition that might exist. Under such circumstances, deference to clearly stated and authoritative military caveats would be appropriate and substantial. Compare, e.g., Near v. Minnesota ex rel. Olson, 283 U.S. 697, 716, 75 L. Ed. 1357 , 51 S. Ct. 625 (1931) ("No one would question but that a government [in wartime] might prevent actual obstruction to its recruiting service or the publication of the sailing dates of transports or the number and location of troops.").
Those circumstances are not presented here, however. Great respect for the thoughtful, professional judgment of the Army witnesses who have testified should not obscure the only official position taken by the Army: it is "not opposed" to the merger. As Assistant Secretary Conver declared, the Army "has no objection to the proposed merger," and "take[s] no official position concerning the antitrust implications of the transaction." Def. Ex. 7 P 3.
The Army could have formally intervened by itself or through the Justice Department, with its antitrust expertise, to assert a fundamental national security interest to be balanced against the public interest in competition. Both Departments as institutions, however, are conspicuously absent here. As stated in the original Memorandum filed with the Order in this case: "With all respect for the two conscientious and impressive Army witnesses who testified on behalf of the defendants, their testimony was too muted and speculative to overcome the critical fact that the Army as an institution does not recommend the merger or seek to bar the injunction of it."
The record also explains the neutral position of the military here. In addition to the fact that critical technology and personnel will be available through the subcontractors to the winner of a competitive bid, as discussed above, the evidence shows that the Army has other means of securing its interests. As a number of Army personnel have stated, the Army is capable of directing use of critical facilities by the systems contractor, including the Olin Flinchbaugh facility, if it is concerned about the transfer of technology. Furthermore, it is the Army that originally elected to downselect through a competitive bid on the training rounds. If the Army determines later that a winner-take-all contract would be detrimental to the advanced tactical program, it has the legal right to continue to procure the advanced KE rounds from Olin and advanced CE rounds from Alliant.
This matter is sufficiently important, and time factors are sufficiently important to the parties and the Army, to justify expedited resolution on the merits by the Commission and, if necessary, appellate review. Meanwhile, at this preliminary stage, plaintiff has met its burden of demonstrating both a likelihood of success on the merits and that the public interest favors an injunction. Accordingly, the November 18, 1992 Order granted plaintiff's motion and enjoined the merger pending expedited Commission consideration of the merits.
Dated: November 23, 1992
Louis F. Oberdorfer
UNITED STATES DISTRICT JUDGE